Making energy-efficient home improvements will not only help cut your cooling costs this summer, but can also provide a sizable break on your tax bill come tax season.
Thanks to the stimulus package, which passed in February, consumers can receive tax credits for up to 30% of the cost to make energy-efficiency improvements to their home, like adding insulation or new windows. The maximum $1,500 credit (one-time only) is a significant jump from the $500 offered in years past and will be available through 2010. (Many of the previous credits expired at the end of 2007.)
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Both the tax and the energy savings could really add up, especially considering that the average household spends $1,000 a year on heating and cooling costs, says Ronnie Kweller, spokeswoman for the Alliance to Save Energy.
Still many of these purchases -- like central air conditioners and a new Energy Star-rated roof -- are so expensive that consumers must weigh the upfront costs with potential savings (often, installation costs won't count toward the credit either). Keep in mind that you won't be receiving that 30% tax credit for months after the project is probably complete. And, in some cases, such moves may not be worth it. Ideally, you want to replace the roof, A/C unit or insulation when they can no longer offer any savings on your cooling and heating bills and that usually happens when they reach the end of their lifespan, says Kweller.
Knowing which products qualify for the new tax credits can also be tricky. For example, previous tax credits were doled out to consumers who purchased Energy Star windows. Now, not every Energy Star-certified window qualifies, and the ones that do adhere to stricter eligibility requirements.
Here are four home improvements that can help you cut your summer energy costs and get Uncle Sam to pick up part of the tab:
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Insulation is the cheapest home improvement that qualifies for the tax credits, says Karen Schneider, spokeswoman for Energy Star. And by installing it you could save up to 20% on your energy bills.
For the new insulation to qualify, it must meet the 2009 International Energy Conservation Code (check product labeling or call the manufacturer) and carry a two-year warranty (or be expected to last five years). Insulation at Home Depot and Lowe's costs $10 (for a 32-foot roll) and $56 (for a 119-square foot roll), respectively.
If your home is less than five years old, you won't need new insulation, says Schneider. If your home is older, measure the thickness of the insulation in your attic. Insulation is measured in R-values, which stands for thermal resistance. It should range between R-30 and R-60 (for the northern parts of the country), she says. Every three to five R-values typically equal an inch of insulation, so R-30 could range between six and 10 inches, according to the Alliance to Save Energy. Also check the insulation in your crawl space or basement.
Click here for directions on installing insulation. Or hire a professional contractor, but installation won't count toward the tax credit.
Purchasing New Windows and Doors
Before, tax credits for windows and doors were capped at $200. Now you can get up to $1,500. But that's only if those doors and windows meet certain criteria.
Windows, doors and skylights need a label from the National Fenestration Rating Council (NFRC) that says their U-factor -- a measure of how well they'll insulate the home from heat -- is no more than 0.30. The label also needs to list a Solar Heat Gain Coefficient (SHGC), which measures how much of the sun's heat penetrates into the home, of no more than 0.30.
Still, qualifying windows are expensive, with most ranging from $270 to $1,100, says Susan Roeder, spokeswoman for Andersen Windows and Doors, a window and door manufacturer based in Bayport, Minn. Doors can start at around $840 and go as high as $2,500.
Storm windows and doors can also qualify. The storm window's manufacturer certification statement lists the type of exterior windows, including single pane or clear glass, which it can be combined with to be eligible for the credit. Storm doors need to accompany a tax-credit-eligible wooden door without exceeding a combined U-factor of 0.30.
Installing Air Conditioners
Energy Star estimates the retail price and installation of a five-ton central air conditioner at more than $1,700. That's hardly cheap, but luckily these systems only need to be replaced once every 10 to 12 years, says Schneider.
To qualify, central air conditioners need a Seasonal Energy Efficiency Ratio (SEER), which measures the efficiency of central air, of at least 16 and an Energy Efficiency Rating (EER), which tracks how it operates once the outdoor temperature reaches 95 degrees, of at least 13.
For a list of qualified A/Cs, click here.
Replacing the Roof
Assuming your roof is around 15 years old, replacing it with a metal or asphalt roof that meets Energy Star requirements will help keep your home cool by reflecting the sun's heat -- especially if you live in a warm location, says Schneider.
This is a pricey project, however, running around $200 to $300 per square, says John New, a salesman at American Building Components, a manufacturer of metal roofing in Nicholasville, Ky. For a 25-square roof -- a common size -- it will cost $5,000 to $7,500.
But once you hit $5,000 you'll be eligible for the full $1,500 tax credit, says Schneider.
- tax credits